Global leader in automation
Keyence is a global leader in its field and at the forefront of the automation industry with its sensors, laser markers and machine vision systems. The company has delivered excellent capital growth for investors. It has generated stable free cash flow and high returns on invested capital; and both sales and net profit per employee are among the highest in the industry.
There are a few key reasons for its superior profitability metrics and long-term steady returns. Keyence’s production is fabless (meaning it does not own factory plants) and its resources are concentrated in research and development (R&D), and sales and marketing. Its low fixed cost structure, contributes to its high return on invested capital and earnings are typically resilient during a downturn. This also enhances its long-term competitiveness.
Keyence’s direct sales model (as opposed to a distributor sales model), enables the company to benefit from a virtuous feedback loop with its clients. It employs extremely capable and technical sales consultants, who often design products for their clients before they even know what they need. This strong ability to innovate on product design translates into high gross profit margins (more than 80%). We believe the company is well positioned to reap the benefits of the continuing trend of increased automation in the manufacturing industries.
Source: Company data, Bloomberg and Alliance Bernstein as at March 2022.
Disclaimer: Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. All securities mentioned herein may or may not form part of the holdings of FSSA Investment Managers' portfolios at a certain point in time, and the holdings may change over time.